Income Elasticity of Demand: Is the degree of responsiveness of quantity demanded of a good to a small change in the income of the consumer.
Income elasticity can be represented as-
YED = proportional change in the quantity demanded/proportional change in the income
If the proportion of income spent on a good remains the same as income increases, then income elasticity for the good is equal to one.
If the proportion spent on a good increases, then the income elasticity for the good is greater than one.
If the proportion decreases as income rises, then income elasticity for the good is less than one.